In a Particular Year, Aggie Mutual Fund Earned a Return

question 20

Multiple Choice

In a particular year, Aggie Mutual Fund earned a return of 15% by making the following investments in the following asset classes: $\begin{array}{lcr} & \text { Weight } & \text { Return } \\\hline \text { Bonds } & 10 \%& 6 \% \\\text { Stocks } & 90\% & 16 \% \\\hline\end{array}$ The return on a bogey portfolio was 10%, calculated as follows: $\begin{array}{lrrr} & \text { Weight } & \text { Return } \\\text { Bonds (Lehman Brothers Index) } & 50 \% & 5 \% \\\text { Stocks (S\&P } 500 \text { Index) } & 50 \% & 15 \% \\\hline\end{array}$ The contribution of selection within markets to total excess return was

• A) 1%.
• B) 3%.
• C) 4%.
• D) 5%.

---

Definitions:

Inverse Demand

A rephrased definition: It refers to the relationship that shows the price of a good as a function of the quantity demanded, essentially the inverse function of a demand curve.

Tax

A required economic dues or other form of assessment exacted from a taxpayer by government authorities meant to finance government activities and assorted public costs.

Excess Supply

Occurs when the quantity of a good or service supplied is greater than the quantity demanded at a given price.

Supply Function

A mathematical expression representing how the quantity supplied of a good is influenced by its price and possibly other factors.